Originally published in issue 53 of Tollroads Newsletter, which came
out in Jan 2001.

Page:8

Subjects:peak/off-peak differential value pricing

Agencies:Port Authority of New York and New Jersey PANYNJ

Locations:New York New Jersey NY NJ

The $6,$5,$4 toll increase goes into effect March 25, and is a major innovation by one of Americas most important toll authorities to the adopt the principles of variable tolls to manage traffic flow.

The New York/New Jersey area is now the worlds hothouse of experimentation with the principles of value pricing, with the New York State Thruway having implemented it for trucks on the Tappan Zee Bridge, the New Jersey Turnpike having introduced an off-peak discount last September for all E-ZPass electronic tolltag users, and now the Port Authority putting a major 25% toll rate time differential in place at its six crossings.

It is one thing to have variable tolls on single lanes in Houston, on a couple of bridges in Fort Myers, a resort town in Florida, and on a several take-em-or-leave-em lanes in southern California. But with the PAs decision this January to move forward, variable pricing is being applied on all 14 lanes on the George Washington bridge, the busiest bridge in the world and the western gateway to northern Manhattan, Queens, Westchester and Connecticut, plus the tunnel gateways to Midtown Manhattan (Lincoln) and to Downtown Manhattan (Holland), facilities that handle over half a million motorists a day. And this radical change has occurred in a region notorious for public policy gridlock, lambasted for its stodginess  a paralysis borne of divided jurisdictions and no holds barred interest group politics.

The hothouse toll innovation is also the worlds media headquarters, whose foibles and fiascos are instantly reported around the globe.

With the New Jersey Turnpike and PANYNJ applications about a million motorists a day face peak/off-peak differentials, which can be seen as a ten-fold increase in exposure to variable pricing compared to the Houston, southwest FL, and Southern Calif HOT lanes projects combined  the sum total of such projects to date.

Maam Guvnr of Joysey nearly kills it

The PANYNJ staff proposal previously approved by the board, and by New York Governor George Pataki, was for a $7 cash all-hours toll and different toll rates for E-ZPass: Geo Washington Bridge $5.50 peak, $4 off-peak; the Holland and Lincoln Tunnel $6 peak, $4 off-peak; Staten Is bridges $4.50 peak, $3 off-peak.

But at the last minute New Jersey Governor Christie Whitman declared the toll increases too much. [Both governors have to approve PANYNJ toll changes under the legislation establishing the authority.]

By one account, the whole toll increase package was a near thing. It was almost killed by Whitman despite support from Jim Weinstein, her commissioner (secretary) of transp. Weinstein favored the PA package because he believed it provided necessary revenue for a capital works plan for the PAs different modes  all the others live off tolls!  and because the differential peak/off-peak tolls were needed. Since Whitman had at least acquiesced in the proposed scheme during various briefings and was reported to the PA to be on board, no one could predict she would come out against the toll increase. In addition Whitman had just been named Pres Bushs new EPA administrator, and was leaving the governors office in Trenton for Washington DC.

It appeared, until Whitmans surprise objections, that the PA had got across the point that the top $7 toll for cash would not be paid by New York area motorists because they would almost all have E-ZPass. Without quite publicly using the phrase the idea was that Only suckers pay retail so that most New Yorkers would only be facing a 50% toll increase in rush hours, not a 75% increase that critics of the scheme seized upon.

After she had said publicly that the toll increases were too much Gov Whitman told PA that the most she would accept would be a $5.50 cash toll instead of $7. That was close to the inflation rate between 1991 and today (about 30%).

But it was apparently pointed out to Gov Whitman that $5.50 would be an awkward cash toll to collect because of the frequent requirement for a half dollar change, so from one account of what happened behind the scenes, Gov Whitman then said that the cash toll should be $5. But that would not even put the PAs revenues back to the real value of 1991 tolls when toll rates were last adjusted, and in addition with the shift to E-ZPass actual average toll rates paid would rise far less than inflation.

PANYNJ chiefs then gambled, the account goes. Apparently they told Whitman theyd drop the whole package  the toll increase, the transit increases, the whole the value-pricing project, and the multi-billion dollar capital program, rather than go that low with tolls.

$5 would give them far too little cash/E-ZPass-peak/off-peak differentials to be worth doing. A $5, $4.50, $4 toll increase would provide too little incentive to move peak to off-peak so would not be a value pricing program, and wasnt worth doing, the PA believed. No go at $5 or $5.50, the PA rep told her. They couldnt wear it.

Was she going to be dubbed The Great Spoiler?

Whitman must have known there was widespread political support for what the PANYNJ was proposing. The plan, especially the variable tolls scheme, had got a positive press, with almost all newspapers editorializing in favor, and reporters covering the positive and the negatives in reasonably balanced fashion. Trucker and AAA, the expected heavies against the toll increases were against them in formal terms, but not especially sharply and their objections were not given a great deal of media play. There had also been some opposition, especially vocal from Staten Island, simply protesting their cost burdens, but overall there was acceptance that something like the package was needed. Many planning, environmentalist and business groups thought the PANYNJ plan was a very positive innovation, and promised to raise needed revenues and maybe relieve congestion a bit. Many constituencies stood to gain from the capital works program that the toll increase package would support.

At this point Whitman risked being dubbed the Great Spoiler. It was when the PANYNJ chiefs took a stand against $5 and $5.50 that the governor agreed to go along with $6. And from that came the $6, $5, $4 toll scheme.

Compromises

PANYNJ has earlier compromised with the Staten Is complaints by agreeing to keep a discount program for Staten Is (Goethals, Bayonne, Outerbridge) bridges. For 20 trips in a 35 day period using E-ZPass the toll for cars will be only $2.50/trip all hours.

Carpoolers also got a big break. PANYNJ will also institute a deep discount for HOV3+ vehicles with E-ZPass: a $1 toll. Such carpools are small in number, so the financial sacrifice is small, probably less than one percent.

Commercial vehicles paying cash (all hours) will go from $4/axle to $6 (rather than the $7 proposed.) PANYNJ had proposed that trucks with E-ZPass pay $5.60 daytime and $4/axle midnight to 6am (overnight), but instead following the it is implementing $6/axle cash all-hours and E-ZPass peak hours, $5/axle E-ZPass off-peak, and $3.50/axle E-ZPass overnight hours (midnight to 6am.)

The PANYNJ has gotten a smaller, but still substantial capital works program in the washup. The peak/off-peak differentials are halved at the Lincoln and Holland tunnels, so the opportunity to push some motorists onto transit, or into non-peak hours has been considerably diminshed. At the Geo Washington bridge and the Staten Is crossings the differential is two-thirds of that initially proposed ($1.00 vs $1.50.) The transp reform groups like the TSTC have lamented this.

At the same time, after the deal with Whitman, the peak/off-peak differential has been extended to trucks in the daytime. And it has introduced the afternoon/evening (noon to midnight) weekends into the peak-hour rates for ET-equipped vehicles.

COMMENT: Perhaps the bigger worry is that toll rates are still so rigid. Long periods of years are apparently expected to pass between any toll rate changes. Toll facility managers have not been delegated any flexibility to adjust tolls by their political bosses. This rigidity could be a killer limitation with differential prices peak vs off-peak.

All kinds of modeling of the impact of different tolls has rightly been done to try anticipate the reactions of motorists and to choose the most appropriate rates. But things rarely work out quite as modeled. The PANYNJ and the New Jersey Turnpike surely need flexibility to adjust toll rates with experience.

The most successful variable pricing projects in southern California have been successful in large part because of the ability of the system (in the case of I-15) and managers (in case of 91 Express Lanes) to make toll rate changes on the fly without requiring a huge political exercise to be mounted on each occasion. The danger now is that the prices chosen as a result of a political bargaining process wont be the right prices, but that they are cast in political concrete.

Next time  no, now  they should go for the authority to adjust toll rates within a pre-set range needed for management purposes. Then, instead of the board of PANYNJ getting specific tolls, it should set: cash $6, E-ZPass peak $4.50 to $5.50, off-peak $3.50 to $4.50?

And they might anticipate the possible need to set some shoulder toll rates between peak and off-peak rates? Big steps in rates can cause perverse incentives around the peak/off-peak time boundaries.

And toll rates do not have to be the same at all facilities. Indeed to properly use prices to manage traffic and maximize the productivity of scarce crossing deck they probably need to be differently priced one from another, just as a chain store will finetune prices between different stores in its chain, depending on local conditions. (See www.panynj.gov Steve Coleman tel 212 435 4179)